If you’re new to Medicare you may be anxious to enroll in a Part D Plan. Prescription drugs cost a lot of money and choosing the right plan from the beginning can make your Medicare experience hassle free.
But if you dive in without having a solid understanding of the Part D program and how it works, you may be frustrated and waste a lot of money.
The following video includes an overview of the 5 things you should know about Part D before you enroll. The Part D program has undergone some significant changes since its inception in 2006 and not knowing how the plan works can leave you out in the cold.
Watch: Part D Video for People New to Medicare
Medicare Part D video summary
You can’t talk about Part D without knowing what it is. Part D was signed into law by President Bush and became effective in 2006. There is some debate whether the motivation was to expand benefits for people on Medicare or give a huge gift to pharmaceutical companies. But regardless, the program is now Part of American entitlement benefits and is a lifesaver for many people.
Part D is not Part of original Medicare but is rather an optional program offered by private insurance companies. You can get your Part D drug coverage in one of two ways. You can enroll in a stand-alone plan or enroll in a Medicare Advantage Plan that includes drug coverage.
Plans are good for one calendar year and you must adhere to strict enrollment periods.
Understanding the terminology of Part D is important. Some terms you should familiarize yourself with include:
- Part D premiums
- Part D deductible
- Initial coverage limit
- Part D donut hole
- Catastrophic coverage
Part D premiums have averaged in the mid-thirty dollar range for the last few years. But it’s possible to may $0 per month if you enroll in a Medicare Advantage Plan that includes drug coverage and has a $0 monthly premium.
You may or may not be required to pay a deductible before your plan pays for any drugs. The initial coverage limit is the time when you are paying copayments and coinsurance and your plan is paying their share until $2,850 has been spent.
At this point you will enter the donut hole. The donut hole is to close by 2020 and for 2014 you pay 47% of the company’s cost for generics and 72% for brand-name drugs.
After you have spent $4,550 you leave the donut hole and enter the catastrophic coverage phase where you pay very little for your drugs. And it all starts over the next year!
When you can enroll in a Part D plan
The first time you can enroll is when you first become eligible. To be eligible you must have Medicare Parts A and B and live within the plan’s service area, generally a State.
You have a 7 month window that begins 3 months prior to the month your Medicare becomes effective.
The Annual Election period begins on October 15th and ends December 7th. Information for new plans is made available on October 1st and you can begin comparing plans.
You can switch, drop or enroll in a plan at this time.
There are also Part D Special Enrollment Periods that are generally the result of a change in your circumstances such as moving from your plan’s service are.
The 5 Star Special Enrollment Period allows you to enroll into or switch into a 5 Star rated plan once per year between December 30th and November 8th. But don’t be disappointed if you have very few or no 5 star rated plans available.
In any case enroll in a plan when you are first eligible so you don’t incur the Part D Late enrollment Penalty which can cost you for years.
When comparing Medicare Part D plans the most important thing is to make sure that all your drugs are covered. The list of covered drugs will vary by plan and is called the Part D formulary. Formularies can either be basic or enhanced.
Here are things to consider when comparing plans:
- Part D formulary
- Copayment or coinsurance amounts
- Pharmacy network
- Mail order benefits
The last thing you should be aware of is that the premiums published on the Medicare Plan Finder at medicare.gov may not be what you are really required to pay.
Health Care Reform legislation now requires that Part D premiums be adjusted for your annual income. If you file as an individual and earn more than $85,000 or file jointly and earn above $170,000 you are going to pay more.
Once you have an understanding of how Medicare Part D works and the parameters of coverage you should be able to choose the best plan for your circumstances.